American Airlines parent AMR posts Q2 loss

The inability of U.S. airlines to make hay while the sun shines this summer — evidenced by the $390 million second-quarter loss posted Wednesday by American Airlinesamr parent AMR — means some could starve this winter.

American, the No. 2 airline in size, set the tone for what is expected to be a frightening round of quarterly reports. Historically, airlines have needed big second and third quarters to survive during lean fourth and first quarters.

As a result, analysts are turning up the volume on their warnings that another round of airline bankruptcies is likely late this year or in 2010.

Most endangered, according to most analysts, are US Airways and United, with American a distant third.

JPMorgan analyst Jamie Baker told clients Wednesday that AMR's "liquidity pantry is still fairly well stocked" with $3.3 billion in cash and $3.7 billion of assets that could be sold or refinanced to raise cash.

Baker said he considers US Airways' liquidity pantry to be "bare," and United parent UAL's to be "stocked with canned goods long past their expiration date."

Airlines are struggling despite oil prices being half that of July 2008.

"If someone predicted oil prices would be cut in half from nearly $150 a barrel a year ago, yet the airline industry would be in worse shape, not many people would have believed it," American CEO Gerard Arpey wrote in a letter to employees.

During the recession, millions of travelers — particularly the high-fare-paying business travelers — have reduced their flying, bought cheaper seats or stayed home. The effects are seen in American's quarterly numbers:

•Passenger revenue dropped 22.3%.

•Passenger miles flown fell 8.2% from the year before, overwhelming a 7.6% cut in available seats.

•Money paid to fly each mile fell 15.4%, to just 11.65 cents.

And there's little relief in sight. The industry just launched its second big fare sale designed to fill seats this fall by offering exceptionally low prices.

For a carrier such as American, which Arpey says must net $17 more from each one-way passenger to break even at today's fuel prices and passenger loads, filling more seats with passengers paying low fares is not a prescription for profitability.